Less sloganeering, more voting 
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Less governance, more grass touching.
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True story, USDT started as an add-on to Bitcoin. A non-event in Bitcoin’s arc.
I’m having trouble understanding the argument behind this statement. How does this damage Zcash? Say USDT did decide to create a ZSA, zUSDT (they won’t, but just hypothetically). They’ve just created a hardened version of their own currency and in the process have lost the control they had to monitor it, freeze it, reverse it, etc. The worst they could do would be to stop supporting it, and stop allowing it to be swapped back for USDT. But the zUSDT would all still exist, a harder better version of their own coin. Price could decouple, but it might actually go up, given zUSDT’s hardened unstoppable nature. I just don’t see the harm. Please explain your theory.
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I can’t speak for him, but the common argument is that once stablecoins are ingrained into the network, they represent an additional systemic ris in hard fork situations.
Were the chain to split, like ETH and ETC, the issuers would have to decide which one to honour (or halve the stable value in each chain). If big enough, this puts them in a position to decide the winning chain.
My take on this is that this is true for every type of asset and DeFi Protocol, including Near Intents (to a smaller degree) and Rhea Finance.
I think we are already in this dangerous territory, and I don’t know if a bigger pool of problems makes any difference at this point.
The reason USDT migrated from Bitcoin was because there was a better home for it called Ethereum.
And similarly, there is a better home for ZSAs than Zcash that is also called Ethereum. You can see this in Railgun. Not only does it support permissioned assets but you have access to all the Defi lego blocks on ethereum too. So here’s a question. Why would someone prefer their shielded asset on Zcash, which only offers payment functionality, over Ethereum where you can trade it, lend it and plug into the massive ethereum DEFI ecosystem?
What will have to accompany ZSAs is increased functionality for them and that is probably the single biggest issue here and it goes to what Zcash’s identity is. This is also what i believe @ebfull mentioned on the latest Zero Knowledge podcast. Paraphrasing: there will be additional features needed that we haven’t considered but will find out about once deployed. Not to put words in Sean’s mouth, but that was the gist of it.
I can propose what I think one of those added features might be: faster finality for bridging of ZSAs i.e. Crosslink, which is a separate discussion, but also not really. I have so much to air about my concerns with Crosslink, but to give the simplest example of why it’s bound to be contentious: it has a safety mode. Unstoppable Private Money can’t have a mode where it stops because then it’s not Unstoppable.
I’m quite confident you could poll those in favour of ZSAs and you’d find a corresponding high support for Crosslink, while those not in favour of ZSAs would have a corresponding low support for Crosslink. This disagreement runs much deeper than just ZSAs.
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I am noticing this recurring pattern among the Zcash community where folks have been heads down in Zcash for so long that there is no awareness about the progression of ideas and concepts that have happened in other ecosystems over the years.
Yes, Tether ran on the Bitcoin Omnichain for some time, but due to the slow speed and high cost they mostly migrated to Ethereum, Tron, and other faster programmable chains.
As Tether and USDC grew in size, especially relative to the ETH market cap, the Ethereum ecosystem had a scary realization: user forks were basically dead if Tether and Circle didn’t support them.
There is a good amount of writing and thinking about this, a few examples:
- Ethereum is now unforkable, thanks to DeFi - haseeb qureshi
- https://x.com/ameensol/status/1465378459157295107
- https://x.com/ameensol/status/1555591529703436288
This dynamic of the “circle fork veto” is part of the calculus that led Ethereum to move to Proof of Stake. They had already lost the self sovereignty that comes with proof of work rough consensus, so giving up fork autonomy to staking cabals was an acceptable trade off as that fork automony had already been effectively ceded to Circle and Tether.
With the benefit of hindsight the cryptocurrency space has basically converged on two types of seemingly mutually exclusive chains:
- Self sovereign fiat replacement money aka “digital gold” (Bitcoin)
- Oil for “world computer” (Ethereum, Solana, etc)
Interestingly, the market seems to value “digital gold” better than “oil for world computer” as evidenced by Bitcoin breaking new highs consistently within any 3 year period while Ethereum has not recovered from the peak price at “the merge” from proof of work to proof of stake.
Imo it would be a huge mistake to “try things” that have already been proven less valuable and possibly destroying the whole value prop that Zcash has established.
If you don’t know about the “fork veto”, here is the short version:
- A centralized issuer backs a token/ZSA with some value (in this case USD in a bank account)
- In case of a fork, the issuer must decide which version of the fork they back with their $1
- A crypto currency like BTC or ZEC ends up with 2 versions of the asset where the market decides which hold value
- A central issue decides which version is $1 and which is $0
- Should their issuance on the chain get very large, they control the fork choice for a large amount of value stored on the chain
- Should the community be at odds with the preferences of the issuer, they can essentially force the version they want by threat of causing large economic damage to users who do not follow their preference.
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I wasn’t aware of that. If confirmed, crosslink will be a big no for me too until it’s fixed.
“Insanity is doing the same thing over and over again and expecting different results”.
Crosslink does not have a safety mode, pause button, or any mechanism that allows the protocol to be stopped. In fact, we believe Crosslink strengthens the unstoppability of Zcash and makes the network more secure than pure PoW.
The confusion likely comes from an early GitHub ticket that we posted and tweeted about which mentioned the concept of a hypothetical “andon cord.” That discussion was not about stopping the blockchain. It was about exploring ways to make user-activated hard forks easier to coordinate in extreme or emergency scenarios.
In hindsight, it was a mistake to use that term, as it created confusion and gave some readers the impression that a mechanism that could halt the chain was under serious consideration. In reality, it was part of our process of stress-testing the design and making sure no obvious edge cases were overlooked.
All blockchains ultimately rely on social consensus. Any blockchain can be hard forked if users choose to upgrade the software they run. That is fundamentally different from a pause mechanism or an andon cord, which would allow someone to stop other people’s nodes. A user-activated hard fork only allows users to decide what software they run.
As part of our work on Crosslink, we’ve been thinking carefully about incident response and coordination for extreme scenarios, including how social agreements and an emergency network upgrade patch could reduce the time it takes for users to act collectively if needed. This work makes it safer to shorten epoch length and unbonding periods, but it does not introduce control mechanisms into the protocol itself.
To be clear: Crosslink does not include a safety mode or any protocol-level pause mechanism. If you have questions about Crosslink’s security, please read our most recent blog post. We’ve also hired a mechanism design expert to conduct an independent security analysis, which we expect to publish soon.
For other questions about Crosslink, check out our FAQ: https://shieldedlabs.net/crosslink-faq
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Strong strong agree. Particularly this:
Imo it would be a huge mistake to “try things” that have already been proven less valuable and possibly destroying the whole value prop that Zcash has established.
There seems to be a strong pull towards the eth/cosmos-ification of ZEC, when BTC has proven to have the most amount of value and there is the simplest clearest path to being a better BTC. It makes no sense to me.
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Exactly. We tried “encrypted Bitcoin” and it worked. Now you want to try things that are known to be destructive to whats currently working?
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I totally agree and i think the only narrative that will yield a good return is encrypted bitcoin its easy to understand and stupid simple to shill. Zcash needs upgrades like tachyon for speed but to add ZSAS and crosslink is unnecessary and if ZSAS must be added it should be on Ztarknet.
Zcash is digital gold, not a DeFi platform
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@thowar2, thanks for explaining your reasoning and providing supporting evidence. I am finally beginning to understand your concern. It’s a serious concern too. Could the entire Zcash platform be compromised by the attack of a centralized coin issuer with their own ZSA? That could be catastrophic for Zcash, and it’s right to explore this possibility.
I hope I can provide an explanation that will put you more at ease. In the blog post you link to, Haseeb describes how in Ethereum, there is a house of cards built with stablecoins. If USDC were to favor a fork, due of an intricate web of interdependencies between DeFi apps that involve USDC, everyone else would be forced to follow USDC’s lead, and in this way, Circle, the issuer of USDC, would be able to dictate Ethereum’s core features to the rest of the community. In the case of Ethereum, I think he is right.
However, ZSAs on Zcash are quite different. There’s no house of cards to fall—no ZSA is dependent on any other. Each ZSA is its own independent card, if you will. Nor could there ever be a web of interdependent DeFi applications on Zcash. Moreover, unlike with Ethereum’s ERC20 tokens, each ZSA must support the exact same simple features as every other ZSA, and these features give each ZSA the same type of hardness of ZEC itself. Each ZSA token is private and unstoppable. This is very different from USDC on Ethereum where USDC transactions can be monitored and even frozen by Circle.
ZSAs are very simple. They can be used for saving and for spending/transfering—nothing more. (You can also selectively disclose ZSA transactions.) As you know, in Ethereum, ERC20 tokens can support endless options, from fees and taxes being imposed with each transaction or over time, to alternate tokens being issued, and they are utilized by that house-of-cards of of DeFi applications. None of this can ever be true for ZSAs, and because of this, even if a stablecoin were issued as a ZSA (which is unlikely itself), the issuer would have far less leverage than Circle has on Ethereum.
As I mentioned in my earlier post, sure, a centralized issuer such as Circle could stop supporting swaps from zUSDC back to USDC on other blockchains, but that would only affect the zUSDC ZSA; it would not touch any other ZSA, nor ZEC itself, let alone the entire Zcash system. Also, Circle would not even be able to stop people from continuing to use zUSDC with each other, privately. This zUSDC would actually be harder money that USDC itself, and as I have suggested above, it might actually go up in price as such. Very worst case, the value of zUSDC might go to zero, and the rest of Zcash, ZEC, and other ZSAs would keep humming along as usual.
This is one reason why no centralized issuer of a stablecoin wants to issue a ZSA, by the way—they want to be able to monitor and control their users more than ZSAs allow. Holding this hard line was one that the Zcash community united on a few years ago. Initially, QEDIT had designed ZSAs in such a way that transactions could—at the issuer’s option—be monitored, but once the Zcash community realized this, they spoke up loudly 
, and the monitoring feature was removed.
As I’ve explained, each ZSA issuer has far less influence than Circle does on Ethereum, and the more ZSAs are issued, the harder it becomes for any centralized entity to have any influence at all. Any centralized entity attempting a fork would be asking everyone else—without any leverage—to move to a less private, less hardened blockchain. Since this is Zcash’s core value proposition, it is doubtful that their proposal would have any wings.
I hope this also answers your question @Chewbacca
It is ZSAs’ simple hardened uniform feature-set that is the key to why they belong on Zcash. Only Zcash can offer this level of hardened privacy.
Zcash with ZSAs is superior Freedom Money because users are no longer forced to perform their private transactions and maintain their savings in ZEC. They have an expanded freedom of choice. Freedom and choice are two core Zcash values.
I hope I’ve put your very serious security concerns to rest, Tom. You strike me as someone with strong opinions, but I’m hoping you’re of the “strong opinions, loosely held” school, and I’d just ask that you consider what I’ve written and adjust your opinions as you see fit. If you have other objections to ZSAs, I’m all ears.
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You are correct that the threat is worse for Ethereum due to the entanglement of DeFi, but consider this scenario:
- Circle (or any other arbitrary centralized issuer) puts their exogenous asset (USD) on Zcash via ZSA
- The total circulating value of this ZSA grows and has decent usage.
- The issuer (Circle) now wants to implement a fork that does something that sounds kind of useful, such as adding basic Uniswap style swaps between ZEC and ZSA. This gets through because it sounds useful.
- The total circulating value of this ZSA grows and exceeds the value of ZEC market cap itself.
- The issuer decides it would like to have a view key and freeze key and pushes forward a fork that would allow them to monitor and freeze accounts.
- This causes a civil war between ZEC holders and ZSA issuers.
- The chain forks and exchanges must decide which fork they should support. Given the issuer itself will only back the version they want and the total circulating value is higher than the value of ZEC, which fork do you think exchanges will support? What do you think happens to the value of the ZEC version that stays maximally private?
- Even if both versions are supported, how damaging would this be to have 2 forks of ZEC?
This is a very specific scenario, but its easy to imagine various permutations of this. Given what we have learned from multiple Bitcoin and Ethereum forks (including the absolute chaos the powETH fork sustained due to USDC in DeFi), the endgame of this is highly probable to violate the values of Zcash.
The simplest defense to these attacks is to never, under any circumstances, allow exogenous assets to invade Zcash and threaten our sovereignty.
You are correct that I generally am of “strong opinions loosely held” - this one in particular is one I’ve been thinking about for over 7 years!
I was a strong proponent of decentralized stables and built one of the first wallets that use DAI as a medium of exchange in 2019. I absolutely love the idea of private USD! I’ve done extensive market research on the growth of stablecoins in DeFi and in non-US markets with specialization in Asia and Latam. I’ve watched, first hand, the rise of Tether among the p2p grey markets in capital control countries all over the world. I was sharing the insane stats of Tether usage in private documents well before they became common knowledge. You’ll be hard pressed to find anyone who understands the utility and use cases as much as I do.
I would love to see private USD tokens - on any other chain than Zcash. I would love to see ZEC backed decentralized private stables on another chain. The usage of ZEC on NEAR DeFi is very exciting to me, as is the direct issuance of private stablecoins on Aleo.
I’m fully supportive of the use case that ZSA proponents are excited about! Just not on Zcash. It’s special and it needs to be protected.
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I don’t want to distract from this thread but I feel this may be relevant:
It’s not binary, anything that has value can be a medium of exchange - if you expect the thing you are exchanging it for has more value to you then the thing you have then you will exchange it.
The question then becomes what are the scenarios in which you exchange:
- Bitcoin and Gold are frequently used in large transactions: countries settling balances, people buying houses, etc.
- ETH and SOL are frequently used as crypto native exchanges, swapping for other assets or micropayments for gas, etc.
- Stablecoins are frequently used for operational transactions on the order of weekly/monthly or larger. The most frequent use cases (outside of defi/trading) are sending relative (to the sender) larger amounts cross border or receiving payroll.
- Even on the most performant blockchain, crypto is rarely used as a daily spender. Cash, credit cards, local payment systems dominate here. Its highly unlikely that anything short of visa issued stablecoins will change this behavior. I also don’t think this “daily spending” currency is that important of a MOE market to address. For example, if I keep my savings in USD but I visit a foreign country for a week, I will withdraw a weeks worth of foreign currency for local spending. Crypto has historically solidly been the “savings account” under every permutation (asset or stable) and for nearly every wealth level, and imo this is a good outcome for self sovereign money.
That said I personally have found that the privacy of ZEC has made me more likely to use it for smaller transactions. As an opsec conscious person I typically shy away from using transparent ledgers for small payments.
I am interested to see how user privacy impacts usage of stablecoins on other chains that are better suited for issuers and performance.
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Your scenario is unlikely for two reasons:
- The chance of a centralized issuer directly issuing a ZSA is low. There has been active outreach to issuers, and pretty much nobody wants to do it. Too much regulatory risk. I think the only entity that wanted to try was a group that wanted to launch a ZSA based on the Swiss Franc, and they wanted a grant to do it. I think any centralized issuer that attempts to issue a ZSA will be shut down by regulators. Some 3rd parties might try to bridge over USDT or USDC, but I think it is the community’s responsibility to try to make more decentralized alternatives such as DAI the dominant bridged stablecoin. I know that DAI has centralized collateral, and ideally we have a stablecoin built on the same delta-neutral mechanism as Ethena USD but that is based entirely on DeFi and smart contracts. Anyway, you can’t directly freeze DAI currently, and the risk is lower. In the case of DAI we have MakerDAO as a layer of indirection between us and the issuer. The issuer would have to pressure Zcash indirectly through MakerDAO. This adds complexity and overhead, and the incentive for the centralized issuer to try to influence Zcash through MakerDAO is limited and obfuscated, because if they rather just tell MakerDAO to blacklist Zcash bridges, their USDT/USDC will still exist on Ethereum, and even the DAI will still exist on Ethereum. So unless it is somehow clear that ZSAs indirectly induce massive demand of USDT and USDC on Ethereum there is little incentive for the issuer to attempt a complex indirect influence operation on Zcash when there is a much simpler blacklist option.
- In a civil war between ZEC holders and ZSA issuers, ZEC holders would trounce ZSA issuers. What would happen? There would be mass redemptions of the ZSA as there is little point with a ZSA with a backdoor. The devs are not going to support the surveillance chain, so it would stagnate and not even get help with backdoor implementation and exchange integrations. Hopefully we move to Proof of Stake, and in that case the economic security of the backdoor fork would collapse as ZEC holders are the one providing it. ZEC would lose some value in the event, but if ZSAs ever become that big and such a fork happens, then the net effect of ZSA will still likely have been positive.
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For the point being considered in this thread, is bridged DAI all that different from a centrally issued fiat ZSA? If a Zcash fork is proposed, the bridge operator has to choose which fork to support. If many people/businesses transact with bridged DAI, then they will be strongly influenced to select the fork that the bridge operator chooses, right?
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some people in this thread have mentioned adding programmability to complement ZSAs. If so, that would lead to the “DeFi house of cards”
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even without a “DeFi house of cards”, the house of cards still can exist off-chain. If a centrally issued ZSA (I’m not just talking about stables/fiat here) gets widely adopted by users/businesses, all of those users/businesses will want to follow the central issuer, lest their off-chain businesses suffer.
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If no centralized issuer will utilize it and instead a bunch of sketchy bridges issue it in violation of global AML policies then we’ve either introduced something useless or needless risky to Zcash. Both scenarios are negative for Zcash, introducing both technical risk and hacking risk to the ecosystem.
Having worked directly on the GENIUS bill, I know that the US govt is very insistent on being able to issue freeze orders on any form of tokenized fiat which will make fly by night bridges into illegal money transmission businesses ripe for sanctions orders. Meanwhile commodities such as ZEC are protected by US 4th amendment protections of private property. It is totally unnecessary to attract such high level government action against Zcash just to include illegitimate issuers.
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Given that the privacy set of Zcash is based on the ZEC price (and maybe the ZSAs issued) then the most private form of ZEC will be the one exchanges continue list and provide liquidity for. In the event of a fork, it is highly likely they will “bless” the version that a large stablecoin issuer blesses rather than what developers prefer. The “privacy purist” version of Zcash would languish in this scenario lacking any liquidity to support the price, thereby reducing the privacy set and utility of ZEC.
We can sit here coming up with life/death scenarios all day, but the point is this does actually introduce potential fatal risk to Zcash and the onus is on the proposer who wants to make a change to eliminate these risks.
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A timely article from a long time Ethereum supporter lamenting the centralized issuer problem:
“He who can destroy a thing, controls a thing”
Given his extensive background in law and crypto he is able to dig deeper into the nuances of this debate.
My takeaway from his article: if you are going to cede control of the blockchain to external issuers, at least do it with peer based issuance (many founders issuing equities) instead of centralized issuance, which is entirely incompatible with centrally issued assets such as USD.
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I don’t see a realistic way for an external actor to force a fork without first accumulating a meaningful amount of ZEC and actually having a voice within the Zcash community.
The node repos are maintained by people who aren’t going to bend to the wishes of Circle, Bitcoin maxis, or any external issuer. Even today, sentiment polls are explicitly non-binding, and that’s clearly understood in advance.
Zcash upgrades only move forward when there is clear, broad consensus, especially among holders, and especially large holders. From what I can see, that consensus simply isn’t there right now. None of the recognized Zcash leaders are publicly advocating for ZSAs at this stage.
Anyone can fork any chain and add whatever stablecoins they want. That isn’t a threat to Zcash. If you weaken or turn off the shielded layer, you immediately kill all shielded assets. At that point, the chain becomes meaningless and it certainly isn’t Zcash anymore.